SNO follows third cell licence's rocky path

Well, the good news about the protracted second national operator (SNO) licence issue is that our esteemed communications minister is "applying her mind" to the process, according to a recent Department of Communications press release.

And the worst is that even when we eventually reach the stage where Ivy recommends a bidder, it may not end there.

Rodney Weidemann, Journalist, ITWeb

The bad news is that when we suffered through the third cellular licence debacle a few years ago, she was also quoted as "applying her mind" to the options open to her (after the regulator had made its recommendation).

Why is that bad? Because she was applying her mind in July 2000, almost a full year before Cell C was eventually allowed to officially begin operations.

Which made me think, just how many other similarities exist between the current stop-start affair that is the SNO process and the third cell licence, which dragged on for some three years before it was finally resolved?

Well, for one thing, a spokesman for the ministerial office was quoted on ITWeb on 11 March 1999 as saying: "The third licence will still be issued in July as originally planned," when of course, it actually took almost two more years before Cell C was up and running.

A look at some of our earlier SNO stories shows that the original deadline for applications for the licence was 30 August 2002, with the licence expected to be awarded by December last year. Well, here we are, almost a year later and still no light at the end of that particular tunnel.

Another similarity between the two processes is the complaints from some of the partners in the bidding consortiums, that the continual delays allowed the competition time to strengthen their positions.

While we know that Cell C is closing the gap between the big two of Vodacom and MTN, it still has some way to go before it can compete on a level footing, and as much as anything that can be put down to the fact that it took two years beyond the original projected date for the licence to be awarded.

By the same token, we have seen Telkom increasing its prices to the maximum allowed by the regulator, introducing new services with a regularity never before seen from the monopoly and tying many of its big customers into long service contracts.

Why? Because it's the best way to get one up on the competition, even if the competition doesn't actually exist yet.

Interestingly enough, apart from the similarities that were thrown up, I discovered some surprising differences, although naturally despite the fact that they were opposite sides of the same coin, they still have the same ultimate effect - further delay.

During the third cellular process, the SA Telecommunications Regulatory Authority (SATRA), predecessor of the Independent Communications Authority of SA (ICASA), commissioned a report by BDO Spencer Steward, analysing the various bidders' financial plans.

When SATRA named Cell C as its preferred bidder, saying that it had a business plan validated by reputable securities companies and that the company will be financially stable because of funding of empowerment partners, there was an outcry.

This was because SATRA's decision was in complete contrast to the BDO report, which said in its analyses that Cell C would be technically insolvent from 2000 to 2005, that the proposed capital structure was not feasible and that re-capitalisation would be required for the company to function.

It seems that ICASA decided to do things the other way round with the SNO bids, commissioning Next Generation Consultants to do an analysis of the opposing bidders' business plans, and then pretty much taking what Next said as gospel.

This despite the fact that both bidders clearly showed that not only had the consultants exceeded their mandate (by suggesting possible alternatives to the two bidders), but had also used the wrong criteria in judging the bids.

Both Two Consortium and CommuniTel complained that the Next report used the criteria from the original invitation to apply (ITA), which was only relevant during the first round of bidding, when both Optis and Goldleaf's bids were considered too lightweight.

Their argument was that the ITA should not have been applied to the second round of bidding, particularly considering that the bidders had already been cleared by Ivy's very own SNO Working Committee.

And the worst is that even when we eventually reach the stage where Ivy recommends a bidder, it may not end there, as Nextcom, which lost out to Cell C in the bidding process, immediately launched a court action, based on the disparities between ICASA's recommendation and the BDO report.

So, when one considers that the SNO bidders found problems with the Next report, what price the loser (assuming Ivy eventually does decide, despite ICASA's present recommendation, to award the licence to one of the bidders) launching a court action that will further delay the process?

Of course, when Nextcom launched its case and received a high court interdict, preventing Ivy from awarding the licence to Cell C, she was quoted as saying: "The much-awaited judgement... has scuppered the process, sending a negative signal to foreign and domestic investors considering SA as a preferred investment destination."

Which raises the following question: if she is so desperate for foreign investment and feels that these kinds of delays adversely affect international opinion and damage SA's reputation and standing, why has it been two months since ICASA made its (somewhat pointless) recommendation and we still have heard no word from her, regarding what she plans to do.

She has the power to overrule ICASA and license one of the bidders anyway, or she can take the Internet Service Providers' Association's suggestion, and set a date from which VANS (value-added network services) operators may provide their own facilities, carry voice and resell, cede and sublet facilities.

Instead, she has been totally silent on this issue, leaving everything hanging while she plays at being temporary president, or flits off to some other foreign country to give some speech or other, while the SNO process hangs in total limbo.

Still, the ICT industry must take heart - after all, Ivy IS applying her mind to the matter...